Recent over one of the most important General Anti-Avoidance Rules (GAAR) issue , a decision made by the government regarding postponement of GAAR by a year is likely to be a big relief for private equity (PE) and venture capital (VC) firms to structured themselves as per its provisions.

One best thing in GAAR is of its taxation provisions as per that the investor if get caught up in the Gaar non-compliance then he should pay the maximum tax upto 10%, not 20% and relaxed the norms for arrest of persons involved in violation of Customs Act.
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“It is only from next year that the investors will have to pay 30% if they are non-compliant with Gaar. The zero-tax arrangement continues for all investments that are Gaar-compliant,” a statement said.

Now the investment firms that wants to caught up by GAAR as its compliant has enough time to do so that will not impact on the funds’ inflow from the PE / VC community going forward.

Presenting the Finance Bill, 2012 in the Lok Sabha yesterday, Finance Minister Pranabh Mukherjee announced, “The government has decided to withdraw the levy (one per cent excise duty) on all precious metal jewellery, branded or unbranded, with effect from March 17, 2012.”

However as per source report, PE / VC firms were never opposed the GAAR, the only problem was from the implementation procedure, a surprise for all.

But now assurance given by the government and now it will not be retrospective as long as the assessment is over which basically means no reopening of assessments, said Mahendra Swarup, president, India Venture Capital Association.